The following equations describe an economy. Y=C+I+G C=50+0.75(Y-T). I=150-10r. (M/P)d=Y-50r. G=250, T=200, M=3,000, P=4
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The following equations describe an economy. Y=C+I+G C=50+0.75(Y-T). I=150-10r. (M/P)d=Y-50r. G=250, T=200, M=3,000, P=4
a. Identify each of the variables and briefly explain the meaning of each one. b. From the above list, use the relevant set of equations to derive the IS curve. Graph the IS curve on an appropriately labelled graph. c. From the above list, use the relevant set of equations to derive the LM curve. Graph the LM curve on the same graph you used in part (b). d. What is the equilibrium level of income and the equilibrium interest rate?